THE  RESTRICTION  OF  OUTPUT 


BY 


CHARLES  WOODY  THOMPSON 


THESIS 


FOR  THE 


DEGREE  OF  BACHELOR  OF  ARTS 


IN 

ECONOMICS 


COLLEGE  OF  LIBERAL  ARTS  AND  SCIENCES 

UNIVERSITY  OF  ILLINOIS 


1922 


i 

I 

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\ 


UNIVERSITY  OF  ILLINOIS 


p-i  \ 

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Augu_s_t  __11_ 192^- __ 


THIS  IS  TO  CERTIFY  THAT  THE  THESIS  PREPARED  UNDER  MY  SUPERVISION  BY 

C.}aajpl^s_3Ip_Qdy_  -Tiiompimn 


ENTITLED Ths_.Hesii:iatXon-Qf-Qu.tput 


IS  APPROVED  BY  ME  AS  FULFILLING  THIS  PART  OF  THE  REQUIREMENTS  FOR  THE 
DEGREE  OF  Ba£Llje_lor_^f__Axt5. 


Approved  : 


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TABLE  OF  CONTENTS 


puge 

Statement  of  the  Problem  1 

The  Factors  of  the  Problem,  Capital  and  Labor  1 

Aspects,  Individual  and  Social  3 

Restriction  by  Capital  3 

Restriction  by  Labor  5 

Doctrines  underlying  Restriction  by  5 

Labor. 


1. 

Make -work 

5 

2. 

V/ork-fund 

7 

3. 

Lump-of-labor 

7 

The  Pr 

'ssent  Money  Regime 

8 

Motives  for  Restriction 

8 

1. 

Reduce  Unemployment 

1C 

2. 

Increase  Povver  of  Labor 

11 

3. 

Make-work 

11 

4. 

Fear  of  Overproduction 

11 

5 . 

Labor  as  a Commodity 

12 

Methods 

12 

1. 

Make  Labor  Scarce 

13 

2. 

'‘Common  Rule" 

13 

3. 

Restriction  of  Quality 

14 

4. 

Union  Rules 

14 

a.  Limitation  of  Performance 

14 

b.  Collective  Bargaining 

15 

c.  Opposition  to  Machinery 

16 

Summary  of  the  Policy  of  Restriction 


by  Labor. 

16 

Economic  Results 

18 

Result 

of 

such  a Policy 

to  Wages 

18 

Result 

of 

such  a Policy 

to  Capital 

18 

Conclusion 

19 

Digitized  by  the  Internet  Archive 
in  2016 


https://archive.org/details/restrictionofoutOOthom 


THE  RESTRICTION  OF  OUTPUT 

It  ia  a -vilely  observed  phenomenon  that  a portion  of  a 
stock  of  goods  may  be  worth  more  than  the  entire  stock.  Another 
recog'nizcd  fact  is  that  most  people  -will  exert  themselves  as  little 
as  possible,  (l)  Thus  the  tendency  in  such  a case  may  be  for  one 
to  produce  only  a portion  of  the  entire  stock  for  distribution. 

The  returns  from  this  portion  may  be  higher  to  the  individual.  Sup- 
pose, however,  that  a group  of  persons  were  engaged  in  producing,  at 
a given  time,  the  entire  stock.  Then  if  that  output  were  curtailed, 
so  as  to  try  to  make  the  remaining  portion  more  valuable  than  the 
vvhole,  some  of  the  -workers  ’would  probably  loss  their  employment. 

It  makes  no  differe'nce  whether  capital  or  labor  directs  such  a 
method;  the  result  will  be  the  saiue . This  is  what  is  meant  by 
restriction  of  output.  (2) 

There  are  two  factors  in  the  restriction  of  output,  cap- 
ital and  labor.  Capital  or  capitalistic  enterprisers  have  been 
much  interested  in  such  a method.  It  has  been  established  beyond 
a shadow  of  a doubt  that  such  restriction  exists.  The  practice  of 
letting  -potatoes  rot,  or  bananas  spoil  is  prima  facie  evidence  of 
restriction  by  the  distributors.  Likewise,  similar  methods  are 
known  to  be  employed  by  both  the  capitalists  and  the  manuf ac turers . (3 ) 

w 

Gide  and  Rist,  History  of  Economic  Doctrine . p.518. 

(3) 

This  doctrine  also  goes  by  other  names,  viz;  Limitation  of  out- 
put, limitation  of  work,  restriction  on  performances.  Often  the 
discussion  of  such  a topic  is  made  under  technical  names  such  as  in 
the  Webbs,  Industrial  Democracy,  p. 704-714.  In  this  discussion, 
"limitation”  and  "restrict ion”  will  be  used  interchansreably . 

(3) 

See  the  account  of  the  Coffee  Valorization  plan  in  Brazil,  to 
maintain  prices  in  Marshall,  Wright  and  Field,  Materials  for 
Elementary  Economics,  p.439. 


The  otner  factor  in  restriction  is  labor.  From  this 
angle  the  problem  assumes  a vifell  knov/n  aspect.  The  question  of 
restriction  of  output  is  widely  discussed  from  the  point  of  labor, 
and  more  particularly  organized  labor.  The  press  now  and  then  is 
full  of  accusations  against  labor  and  its  policies.  Such  rules  as 
those  which  the  Flint  Glass  workers  formerly  enforced, (l)  or  as  the 
Cnicago  Building  Trades  adopted  before  1902,(3)  or  the  demands  of 
the  coal  miners  in  the  summer  of  1932,  illustrate  very  graphically 
the  problem  from  this  standpoint,  (d) 

In  all  these  instances,  capital  and  labor  have  as  the 
immediate  goal  their  own  betterment.  This  leads  us  to  the  next 
step  in  the  analysis  of  the  problem  of  the  restriction  of  output. 

In  all  questions  of  this  sort,  it  is  necessary  to  distinguish 
between  two  aspects.  They  are  the  individual  and  the  social  view- 
points of  the  problem. 

From  the  individual  viev/point,  the  policy  of  restriction 
may  be  perfectly  justifiable.  The  laborer  sees  that  it  may  increase 
his  wages,  may  give  him  steadier  work,  or  may  permit  his  unemployed 
brethren  to  get  work.  From  the  viewpoint  of  the  trade  union,  the 
policy  of  the  restriction  of  output  is  legitimate.  It  temporarily 
may  make  them  more  work  or  higher  wages.  From  the  viewx:)oint  of 
the  capitalist  such  a policy  is  above  reproach.  It  may  make  him 
more  profits.  Most  individuals  measure  the  returns  of  their 
actions  in  the  terras  of  their  own  personal  interest.  If  it  brings 

TT) ^ 

Renort  of  U.  S.  Industrial  Commission.  Vol.VII,  p.l65. 

(2)  — 

For  a treatment  of  the  Chicago  Buildings  Trades  Dispute  see; 
Commons,  Trade  Unionism  and  Labor  Problems,  First  Series,  p.96. 

(3) 

See  the  Report  of  U.  S.  Industrial  Commission  for  instances  of 
restriction  of  output.  Vol.XVII. 


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th$m  added  wealth  and  enjoyment,  it  is  excellent. 

This  species  of  narrow  mindedness,  so  common  in  this  v/orld, 
must  give  way  to  the  social  viev/point,  however,  in  the  consideration 
of  this  type  of  problem.  If  any  organization  or  individual  limits 
output,  and  gains  by  it,  the  consuming  public  pays  for  the  gain. 

They  are  deprived  of  something.  Doctrines  or  p>ractices,  however 
good  for  a class,  must  never  remain  operative  if  they  bring  harm  to 
the  social  group.  In  this  discussion,  Marshall's  dictum  should  be 
remembered.  "It  is  necessary  to  adhere  to  general  reasoning,  for 
a direct  appeal  to  experience  is  difficult;  and,  if  made  lightly, it 
can  but  misleads"  (l) 

Having  distinguished  tne  point  of  view  from  which  this 
problem  is  to  be  considered,  the  first  and  older  factor  that  has 
restricted  output  is  capital.  The  capitalist  or  producer,  in  order 
to  effectively  curtail  his  production  with  profit  to  himself,  must 
have  a virtual  monopoly  of  the  market.  Thus  he  can  control  supply 
without  fear  of  competition.  "The  monopolist  will  normally  endeav- 
or to  fix  his  output  at  such  a point  that,  given  the  existing  state 
of  demand,  he  will  secure  the  highest  possible  net  return."  (3) 

He  can  increase  his  gross  receipts  by  increasing  output,  up  to  a 
certain  point,  yet  the  increase  vtfill  not  be  in  proportion  to 
increase  in  output,  because  of  a lov;er  price  of  the  extra  goods. ^ 
This  added  output  v;ill  mean  an  increase  in  his  aggregate  expenses 
of  production.  "In  fact,  it  may  often  happen  that  the  fact  that 

ID 

Marshall,  Principles  of  Econowiics.  p.700. 

(3) 

Ely,  Outlines  of  Economics . p.301. 

Also  see,  Seager,  Principles  of  Economics,  p.333,  for  a discussion 
of  net  returns. 


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generally  sxpanled,  the  higher  vifill  be  the  monopoly  prioe  v/hich  vjill 
yield  the  largest  net  returns.”  (l) 

Monopoly  price  tends,  generally,  to  be  a high  prioe. 
Monopoly  is  formed  for  the  purpose  of  profits.  This  is  borne  out 
by  the  decisions  of  the  courts,  the  findings  of  the  Industrial  Com- 
mission, and  the  orders  of  the  regulatory  bodies. 

To  summarize,  such  a policy  is  a narrow  one,  beneficial 
from  an  individual  viewpoint  only.  Socially,  it  is  harmful, 
because  many  people  are  deprived  of  commodities  v/hich  they  would 
otherwise  use  and  enjoy.  Hov/ever,  in  actual  practice,  it  is  irapos- 
ible  to  determine  the  absolute  point  of  maximum  returns.  It  can 
only  be  approximated,  and  is  usually,  therefore,  belov/  the  maximum. 
But  the  fact  still  remains  that  the  methods  above  theoretically  dis- 
cussed apply,  in  general,  to  the  practices  of  the  monopolies  as  they 
actually  exist.  (3)  ^ 

An  examination  of  the  doctrines  underlying  the  methods  and 
motives  of  restrioi:ion  of  output  by  labor  will  indicate  the  founda- 
tion upon  which  such  a policy  is  defended.  The  laborer  thoroughly 
believes  in  the  make  work  theory.  "According  to  his  philosophy,  a 
snow  storm  blockading  a city  is  an  advantage  to  vvorkmen,  as  it 
'makes  work'  for  snow  ahovelers."  (3)  This  doctrine  grows  out  of 
the  neglect  of  keeping  in  mind  the  goal  for  which  work  aijiis.  We 
<;ork  for  the  fulfillment  of  human  wants;  work  is  only  a means  to  an 

m ^ 

Ely,  Qutl ines  of  Economics.  p.203. 

(3) 

A fuller  treatment  on  the  economic  effects  will  be  found  in  the 
last  section,  p.18,19. 

(3) 

Fisher,  Elementary  Pr inc iples  of  Eoonomics.  p.4ol. 


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end.  Aimless  work  produces  no  goods;  oonsc-iUently,  it  adds  nothing 
to  the  store  of  human  wealth.  Destruction  of  goods,  in  order  to 
make  work  is  entirely  fallacious  because  such  a practice,  althougn 
it  may  lead  to  the  benefit  of  some,  produces  nothing  with  v/hich  to 
pay  for  that  v;ork.  Any  such  pay  received  may  deprive  others  of 
some  of  their  share  in  the  national  dividend,  A Robinson  Crusoe 
would  not  make  v/ork  for  himself  by  destroying  the  berries  that  he 
picks,  nor  would  he  destroy  half  of  his  bucketful  if  the  whole  were 
necessary  to  keep  him,  because  he  thought  that  the  other  half  was 
more  valuable.  Our  present  industrial  organization  and  methods  of 
exchange  do  not  alter  this  necessary  relation  between  satisfaction 
and  efforts.  The  directness  is  only  removed,  thus  making  it 
difficult;  to  discern  that  relation  at  a superficial  glance.  Fisher 
says,  ”'It  is  almost  as  crude  an  error  to  suppose  that  workmen  can  be 
enriched  by  'making  work'  for  themselves  as  that  they  can  be  enriched 
by  issuing  paper  money,"  (l)  Work  and  money  are  merely  a means  to 
an  end,  and  we  must  not  confuse  our  vision,  but  rather  fix  it  upon 
the  end,  and  hold  it  there.  No  matter  how  complex  is  the  organiza- 
tion of  society,  none  of  us  can  escape  the  simple  truth  that  our 
iVell-being  depends  on  the  gred.test  possible  output  at  a minimum  cost. 
By  this  we  can  thus  minimize  the  effort  by  which  goods  are  obtained, 
and  maximize  the  final  satisfaction  of  life.  (3)  It  is  as  impos- 
sible to  produce  v/ealth  by  any  method  based  upon  the  make  work 
ioc trine  as  it  is  to  make  gold  from  the  baser  metals.  History  'will 

m 

Fisher,  Elementary  Principles  of  Economics.  p,451, 

(a) 

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-7- 

ehov'(/  us  to  be  as  futile  in  our  efforts  to  do  so,  as  she  nov/  shov/s 
the  Alchemists  to  have  been  three  hundred  years  ago. 

Another  of  the  doctrines  of  labor  is  the  work  fund  theory. 
The  reasoning  underlying  this  doctrine  is  as  follows;  there  is  a 
certain  amount  of  work  to  be  done,  v/hatever  the  price  may  be.  Thus 
labor  can  adopt  any  method  they  desire  in  doing  this  work.  This 
doctrine  is  false.  As  Professor  Marshall  points  out,  "the  demand 
for  v/ork  comes  from  the  national  dividend:  that  is,  it  comes  from 
vvork.  The  less  demand  there  is  of  one  kind,  the  less  demand  there 
is  for  v/ork  of  other  kinds:  and  if  labor  were  scarce,  fewer  enter- 
prises would  be  undertaken."  (l)  Such  doctrines  as  these  have 
taken  a fascinating  hold  upon  labor  and  their  leaders,  and  the 
sooner  they  are  disillusioned,  the  better, 

A third  doctrine  that  has  led  labor  astray  is  that  of  the 
lurnp-of-labor . Nothing  makes  employers  more  indignant  than 
restraints  upon  output  based  upon  this  doctrine.  As  Mr.  Hobson 
says,  "Restriction  of  output  is  based  upon  the  ' lump-of- labor ' falla- 
cy; the  false  notion  that  there  exists  an  absolute  limited  amount 
of  employment,  and  that  if  the  stronger  or  quicker  men  do  more  than 
their  share,  the  others  will  go  short."  (2)  It  is  evident  that  the 
above  arguments  are  very  closely  related.  The  work  fund  doctrine 
takes  in  the  cost;  i.e.,  that  the  vVork  will  be  done  irrespective  of 
it.  The  latter  theory,  on  the  other  hand,  takes  in  consideration 
only  the  lii.iitation  aspect  of  the  whole  affair,  laying  the  stress 

TP 

Marshall,  Princi'oles  of  Economics . p.S97. 

(a) 

Hobson,  Wealth  and  Work . 


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-8- 

upon  the  amount,  (l) 

Either  doctrine  is  fallacious  on  the  saiae  grounds;  namely, 
that  labor  cost,  or  v;ages,  coines  from  the  national  dividend,  and  not 
from  any  given  amount  of  v/ork  determined  before  hand.  If  any  group 
of  persons  does  succeed  in  restricting  output,  it  is  a logical  con- 
clusion that  they  are  not  making  work  or  giving  employment,  but 
rather  are  they  depriving  some  one  else  of  some  part  of  his  due 
share  in  the  national  dividend.  If  these  arguments  used  by  labor 
are  analyzed  in  the  light  of  a practical  example  , their  fallacy 

can  be  plainly  seen.  A Robinson  Crusoe  ’.vould  not  restrict  his  out- 

% 

put  for  any  reason.  If  he  needed  a bucketful  of  berries,  he  would 
not  destroy  half  of  them  in  order  to  make  more  work.  If  he  needed 
them  on  a certain  day,  neither  would  he  prolong  his  labors  to  the 
next,  in  order  to  make  his  work  last.  The  destruction  of  naif  his 

efforts  would  not  increase  the  value  of  the  others  in  such  a manner 

that  the  half  would  satisfy  his  v/ants  as  the  whole  had  done.  In 
the  light  of  present  day  conditions  of  distribution  and  production, 
the  example  of  Robinson  Crusoe  is  in  no  way  altered.  The  basic 

principles  still  hold.  V/e  are  only  farther  removed.  We  must,  as 

Crusoe,  labor  sufficiently  to  produce  for  ourselves  the  necessities 
of  life,  and,  as  Crusoe  would  have  immediately  felt,  restriction 
of  output  will  eventually  affect  us. 

4- 

The  whole  problem  is  aggravate!  oy  the  system  of  economy 
under  which  we  live.  It  is  essentially  one  of  money  as  an  expres- 

IT)  ^ 

For  some  defense  of  labor  methods  see,  Adams  and  Sumner,  Labor 
Problems . p.234. 


-9- 

sion  of  all  wealth  and  labor,  (l)  As  such  it  is  a common  fallacy 
to  regard  money  only  as  vvealth.  Viewed  from  a scientific  viev/point, 
no  one  v/ill  deny  that  money  has  some  intrinsic  value,  but  it  vvill, 
in  itself,  satisfy  but  few  wants.  It  is  rather  a measure  of  value, 
a medium  of  exchange.  The  average  individual,  however,  notices 
that  money  is  all  povverful,  that  money  can  be  increased  or  decreased 
at  -will.  He  then  thinks  that  wealth  can  be  created.  From  this 
he  reasons  that  since  ne  can  hoard  money  and  since  it  purchases  the 
satisfaction  of  his  desires,  he  can  curtail  the  araount  of  production. 
But  if  money  were  removed  from  this  earth  and  sent  to  Mars,  it  would 
not  buy  anything.  The  gold  and  silver  would  make  ornaments,  and 
the  paper,  good  bonfires.  It  is  necessary  to  realize  that  money 
is  only  a convenient  medium  to  facilitate  exchange.  A reflection 
behind  the  scenes  will  reveal  the  startling  fact  that  it  is  the 
goods  themselves,  and  not  money  that  constitutes  wealth. 

Vie-.v'ed  from  this  angle,  it  becomes  evident  that  the 
national  income  is  made  up  of  the  sum  total  of  all  our  efforts. 

Any  restriction  will  cut  down  the  dividend  to  be  distributed,  and 
eventually  rest  upon  us.  (2) 

Having  examined  the  doctrines  underlying  any  argument  for 
restriction  of  output  and  having  pointed  out  many  of  the  numerous 
fallacies  behind  these  doctrines,  the  next  question  is  the  methods 
used  by  labor  to  restrict  output.  It  will  be  necessary  to  divide 

IT) 

Fisher  treats  this  point  in  ais  Elementary  Principles  of 
Economics . p.451.  He  says  that  work  and  money  are  merely  a means 
to  an  end. 

(2) 

Marshall,  Principles  of  Economics . Bk.VI,  Ch.VIII. 


\ 


-10- 

the  follov«ring  disouaaion  of  labor's  efforts  to  limit  output  into 
two  parts;  namely,  immeiiate  motives  for  such  a policy,  and  the 
methods  used  to  carry  out  that  policy. 

The  first  of  the  motives  is  to  reduce  the  amount  of 
unemployment,  (l)  Hecht,  in  one  of  his  discussions  says,  ”It  is 
true  that  any  section  of  labour  virhich  restricts  its  production  may 
avoid  unemployment  in  its  trade."  (2)  This  is  obviously  true. 

But  they  do  so  only  at  the  expense  of  the  rest  of  society.  The 
coal  miners,  for  example,  can  do  this  because  coal  is  now  one  of  the 
first  necessaries  of  life,  and  any  restriction  of  it  would  be  borne 
by  the  consuming  public.  "But  if  all  trades  restrict  their  output 
in  the  hope  of  distributing  the  work  better  (to  the  unemployed), 
they  v/ould  find  they  had  merely  less  v/ork  to  distribute,  and  instead 
of  raaking  work  for  the  unemployed,  they  v;ould  unmake  the  v/ork  of  a 
considerable  portion  of  those  employed."  (b)  This  idea  of  giving 
work  to  the  unemployed  is  primarily  based  upon  the  make-v/ork  and  the 
lump-of-labor  doctrines.  The  instigators  of  such  a doctrine  have 
in  mind  the  erroneous  idea  that  work  can  be  made  for  the  unemployed 
by  sharing  that  of  the  employed  with  him.  This  is  based  upon  the 
lump-of-labor  doctrine.  (4)  But,  since  restriction  lowers  the 
dividend  to  labor,  it  vjill  cause  more  unemployment. 

The  second  motive  for  restricting  output  is,  that  such  a 

TTl 

The  laborer  dreais  unemployment;  therefore,  he  opposes  labor 
saving  devices.  Taussi??:,  Pr inciioles  of  Economics . LiL,272. 

(2) 

Hecht,  The  Real  Wealth  of  Nations,  u.310. 

(3) 

Rae,  Eivht  Hours  for  Work,  id. 214. 

(4) 

See  page  7, 


-11- 


policy  auf^inents  and  increases  the  po^er  of  labor,  (l)  The  report 
of  the  Industrial  Commission,  in  one  place  indicates  that  the  one 
doctrine  underlying  all  such  action  of  limitations  was  "that  the 
price  of  labor  power  may  be  increased  by  diminishing  the  amount  that 
is  brought  to  market."  (2) 

Thirdly,  labor  has  in  its  mind,  in  limiting  output,  the 
idea  of  making  more  work.  Of  course  this  is  fallacious.  The  lit- 
tle boy  'Who  destroys  a plate  glass  'Window  does  not  increase  the  na- 
tional dividend  because  his  destruction  makes  more  work  for  the 
glass  makers.  He  has  actually  destroyed  something  from  the  store 
of  wealth.  So  any  method  that  has  as  its  purpose  that  of  making 
work,  either  for  the  v/orkers  themselves  or  for  outsiders,  is  entire- 
ly fallacious.  (3)  Labor,  and  capital  as  well,  will  in  the  long 
run,  lose  by  such  practices.  No  one  can  expect  that  the  normal 
demand  of  consuiuption  goods  'vvill  continue  after  the  means  of  sat- 
isfying that  demand  are  restricted. ( 4) 

Another  motive  for  restricting  output  is  the  fear  of 
overproduction  and  consequent  unemployment.  But  the  wrong  solu- 
tion is  employed.  Such  tactics  as  restriction  produce  more  unem- 
ployment. There  are  other  factors  that  need  to  be  considered. 



Report  of  the  U.  S.  Industrial  Commission.  Vol.XVII,  PLX 

(1) 

Howell,  Conf 1 iot  of  Cap ital  and  Labor,  p. 193-300,  substantiates 
this  by  saying  that  since  capital  by  its  po  ;er  can  v/ith-holi  goods 
from  the  market,  laoor  po’ver  is  justified  in  restricting  effort  to 
make  .work  for  others. 

(3) 

Ho .V ever,  Howell  thinks  that  labor  is  justified  in  making  work. 

( 4 ) 

Rae,  Ei,3:ht  Hours  for  Work . p.215. 


— 1 
— X 

The  fault  usually  lies  with  capital.  It  does  not  follow,  however, 
that  labor  can  cure  the  malady  by  any  such  uneconomic  methods  as 
restriction  of  output.  An  opium  fiend  would  not  recover  oy  having 
v/hisky  administered  instead.  It  would  be  just  as  illogical  to 
adopt  restriction  as  a remedy  for  overproduction  as  to  try  to  pre- 
vent drunkenness  by  arrests.  The  evil  must  be  got  at  from  the 
bottom.  The  whole  system  needs,  perhaps,  a house  cleaning.  Tne 
make-’work  and  the  lump-oi-labor  arguments  both  underly  this  idea 
of  prevention  of  overproduction.  They  labor  under  the  incorrect 
notion  that  v/ork  must  be  curtailed  during  prosperous  years,  in  order 
to  have  something  to  do  during  years  of  depression.  As  a final 
word,  let  i t be  added  that  "constancy  of  employment  is  dependent  on 
the  organization  of  industry  and  trade,  and  upon  the  success  with 
which  those  who  arrange  supply  are  able  to  forecast  coming  movements 
of  demand  and  of  price.”  (l) 

Finally,  labor  is  viewed  as  a commodity  and  as  such  should 
be  bargained  for.  (3)  Thus  the  increased  speed  of  the  worker 
decreases  the  market  value  of  the  unit.  This  would  be  true  if 
there  was  only  a limited  amount  of  work.  But  wiiere  production  de- 
pends upon  effective  demand,  and  the  lower  the  price,  the  greater 
the  demand,  the  more  efficient  workers  a producer  has,  the  more  he 
can  meet  this  lov/,  effective  demand.  If  all  his  workers  be  effi- 
cient, they  may  have  steady  employment  indefinitely. 

A treatment  of  the  methods  of  labor  is  easier  than  that 
of  discovering  the  /notives  that  underly  them.  It  has  the  same  re- 

ITT 

Marshall,  Principles  of  Economics,  p.697. 

(3)  ^ 

Report  of  the  U.  S.  Industrial  Commission.  Vol.XIX,  p.317. 


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-13- 

lation  a.3  cause  and  effect.  Either  may  be  perfectly  visible,  yet 
no  apparent  antecedent  or  consequence  can  be  discerned.  Behind 
every  method  adopted  to  restrict  output,  it  may  be  said  that  there 
are  three  motives;  first,  to  increase  wages;  second,  to  give  more 
employment;  or  third,  to  make  the  ;;ork  last.  Any  other  motives 
suggested  have  their  final  effects  in  these  three. 

The  first  method  employed  is  to  make  labor  scarce,  and 
thus  to  check  the  supply  of  labor,  (l)  But  in  case  this  lessens 

7 

the  output,  the  result  v/ill  eventually  follov;  that  the  national 
dividend  will  be  diminished,  and  therefore  the  return  to  labor  will, 
contrary  to  expectation,  be  diminished.  This  obviously  may  not 
happen  if  a small  group  obtains  control  of  output,  for  they  may 
seemingly  prosper.  But  when  the  day  of  general  restriction  comes, 
the  results  will  be,  as  we  have  seen,  detrimental  to  the  well-being 
of  labor.  The  Webbs  have  called  this  method,  the  ’’Device  of  the 
Restriction  of  Numbers.”  This  is  an  appropriate  appellation,  for 
it  suggests  its  result,  ’’The  Device  of  the  Resfcriotion  of  Numbers 
by  baulking  the  free  selection  (of  the  more  efficient  workers )... by 
stereotyping  processes  and  restricting  output,  lo-wers  the  level  of 
productive  efficiency  all  around."  (S) 

The  second  method  of  restriction  is  seen  in  the  enforce- 
ment of  the  "common  rule"  i.e.  the  enforcement  of  certain  regula- 
tions pertaining  to  all  work  done  by  the  members  of  a labor  union. (3) 

m — 

Marshall  makes  these  tvvo  distinct  points.  See  Principles  of 

Economics,  Bk.VI,  Oh. VIII. 



Webb,  Industrial  Democracy.  p.710.  However,  the  Webbs  believe 
in  moderate  restriction. 

(3) 

See  Webbs'  "Common  Rule'.’’.  See  the  Webbs'  for  a fuller  treatment 
of  the  Device  of  the  Restriction  of  Numbers.  Industrial  Democracy, 
p. 702-739. 


-14- 

Wages  are  often  held  to  a restrictive  standard  by  it.  Tne  common 
v/age  induces  laxity  and  indolence.  Then  production  falls  behind; 
output  is  restricted.  In  this  case,  such  a rule  is  vicious.  It 

keeps  do’,.'n  the  more  alert,  it  discourages  and  drives  out  industry,  (l) 

Yet  the  device  of  the  common  rule  is  good.  When  applied  moderately 
it  has  unquestionably  helped  labor  in  its  uphill  fight.  (2)  The 
danger,  however,  is  in  the  fact  that  it  is  so  easy  for  such  rules  to 
be  excessively  restrictive  in  their  operation. 

The  next  powerful  weapon  in  the  nan  Is  of  labor  is  the 
restriction  of  the  quality  of  the  work  performed.  One  method  of 
accomplishing  this  is  a strict  enforcement  of  the  common  standard 
of  payment.  (3)  The  more  efficient  lag,  and  the  less  efficient 

grow  v/orse.  Another  form  of  quality  restriction  is  the  appliccition 

of  preference  rules  in  the  hiring  of  new  workers.  If  the  union  in 
question  follo.vs  a policy  of  exclusion  in  membership,  the  poorer 
and  less  efficient  members  vvould  be  employed  in  a period  of  expan- 
sion. These  are  a few  of  the  ways  of  restricting  quality.  The 
broader  subject  of  union  rules  will  be  treated  more  tnoroughly  in 
the  following  paragraphs. 

An  examinit ion  of  the  union  rules  will  reveal  something 
of  the  practice  of  restricting  work.  All  tne  fallacious  doctrines 
treated  above  underly  tnem.  One  of  the  most  conspicuous  of  all 
rules  and  the  one  that  calls  fortn  the  greatest  amount  of  indignation 
is  the  one  limiting  the  performance  of  an  operation  to  a prescrioed 

IT5 ^ 

Marshall,  Principles  of  Economics.  p.SSS. 

(2) 

Webb,  Industrial  Democracy.  0.712 . 

(3) ^ ‘ 

Report  of  the  U.  S.  Industrial  Commission,  Vol.XIX  p.817. 

He oh t.  The  Real  Wealth  of  Nations.  p.300. 


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-la- 

amount  of  v/ork  to  be  done  in  a day  or  ueek.  (l)  It  is  an  establish- 
ed fact  that  such  practices  exist.  Plumbers  have  been  known  to 
finish  in  three  and  four  hours,  work  supposedly  requiring  eight 
hours.  They  then  loafed  a half  day,  getting  pail  for  all  eight 
hours.  Such  methods  as  these  are  like  sand  in  the  vjheels  of  indus- 
try. They  rest  upon  the  fallacious  doctrine  of  lump-of- labor  theory, 
that  the  fast  v/orkers  v^ill  soon  exhaust  the  amount  of  work  to  be 
done.  (2) 

The  method  of  collective  bargaining  is  often  injurious  to 
output.  (3)  The  unreasonable  demands,  sometimes  made,  lessen  the 
amount  of  output.  "il^hen  s\ich  is  the  case,  labor  may  lose  by  it. 

Ihe  laborer  should  and  must  be  protected  from  any  and  all  unreason- 
able demands  made  upon  him  by  his  employer,  yet  he  must  not  be  al- 
lowed to  jeopardize  his  and  his  employer's  well-being  by  any  uncall- 
3d-for  demands.  If  the  idea  underlying  this  method  be  that  of 
naking  high  -wages,  by  spreading  out  the  v/ork  over  depression  to 
avoid  unemployment,  the  result  may  be  that  unemployment  may  increase. 
If  goods  be  ’Withheld,  some  will  be  deprived.  Others  will  be  forced 
to  pay  more;  oonsequently,  abstaining  from  less  necessary  purchases. 
Borne  of  these  workers  in  the  less  necessary  industries  will  be 
forced  out  of  work,  and  they  may  cease  buying  of  the  restricted 
article.  The  result  then  strikes  home;  some  of  the  restricting 

m 

Report  of  the  U.  S.  Industrial  Commission.  Vol.XIX,  p.817. 

Commons,  T rade  Unionism  anl  Labor  Problems . Series  I,  The 
Chicago  Buildings  Trades  Dispute. 

[2) 

Hobson  thinks  the  amount  of  work  at  any  one  time  is  limited,  so 
they  are  ri^ht.  Work  and  Wealth. 

(3) 

Hobson,  Work  a'nd  Wealth . 


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-16- 

v/orkers  may  be  released.  Thus  it  is  a vicious  circle.  The  cur- 
tailment of  the  national  dividend  usually  strikes  the  instigators 
sooner  or  later,  (l) 

A third  form  of  the  labor  union's  attempt  to  restrict  out- 
put is  in  the  strenuous  fight  they  have  made  against  machinery. 

This  has  resulted  at  various  times  in  riots,  and  destruction  of 
machines.  When  the  machines  were  installed,  the  men  did  their  very 
best  to  injure  them,  and  to  hinder  their  efficiency.  Seeing  that 
this  had  failed,  the  last  stand  of  labor  in  its  uneconomic  fight  is 
to  limit  the  number  of  machines  one  man  is  allowed  to  tend.  The 
pressmen  accepted  machinery,  imposing  such  rules.  This  is  justi- 
fiable to  a certain  moderate  point,  but  beyond  this  the  rule  is 
unreasonable,  and  leads  to  destruction.  The  fight  against  machin- 
ery is  a losing  one.  True  its  introduction  may  cause  readjustment, 
but  in  the  long  run  the  worker  vvill  profit  by  its  changes. 

There  is  much,  however,  to  be  said  in  favor  of  labor 
unions.  It  is  true  that  they  have  been  pushed  unmercifully  beyond 
the  limit  of  human  endurance.  No  one  denies  tnis;  every  one  admits 
it  is  wrong.  The  "rusher"  and  "company  man"  are  injurious  to  la- 
bor and  society.  The  defense  of  this  limitation  rests  upon  two 
points; (2)  first,  colleotive  bargaining  necessitates  that  one  should 
not  underbid  another;  and  second,  the  employer  desires  to  rush 
his  work  to  such  a point  that  men  wear  out  and  are  scrapped  pre- 

TTl 

Collective  bargaining  is  given  in  the  Report  o.f  the  U.  S. 
Industrial  Commission,  Vol.XVII,  p.LVIII. 

(2) 

Report  of  the  U.  3.  Industrial  Commission.  Vol.XVII,  p.LVIII. 


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-17- 

maouroly.  (l)  The  labor  leaders  are  loud  in  their  condemnation 
of  the  practices  of  some  employers,  and  the  number  of  their  sug- 
gested remedies  is  limitless.  They  can  not  be  blamed  oecause  they 
ha7e  been  taught  that  supply  and  demand  are  the  all  pov/erful  forces; 
a lessened  supply  raises  the  demand;  also,  the  price.  (3)  This 
is  wrong.  Restriction  does  not  usually  deprive  any  potential 
market.  It  deprives  actual  demand;  consequently,  supply  and  de- 
mand do  not  balance.  The  fault  lies  not  in  the  supposed  influence 
of  supply  and  demand,  but  from  a failure  to  oonsiier  the  relation 
of  the  tv/o.  As  has  oeen  sail,  ’'methods  of  raising  wages  which 

make  for  a higher  standard  of  comfort  by  means  that  lessen  rather 
than  promote  efficiency,  are  so  ant  i-soc  la-1  amdshor.t- sigh  ted  as  .to 
invoke  a speedy  retribution."  (3)  ‘ Socially,  any  restriction  upon 

perforraance  that  does  not  permanently  lessen  output,  is  proper,  and 
should  be  encouraged  by  all  •chinking  people.  The  problem  of 
restriction  of  output  by  no  means  bars  social  progress.  Its  full 
understanding  only  3hov;s  the  pitfalls  to  be  avoided,  because  the 
adoption  of  any  such  policy  of  restriction  may  result  in  worse 
conditions  than  those  started  v/ith. 

nr 

"Closer  study  of  the  details  of  modern  industry  has  revealed  the 
fact  that  in  some  trades,  the  sweated  traries  especially,  the  work 
people  are  driven  to  work  beyond  their  strength  by  ’’rushers'  and 
'leaders'  by  the  'minute'  and  'task'  systems,  and  other  semi- 
disreputable devices."  In  defense  of  labor  the  authors  say,  "The 
arguments  of  the  trade  unionists  are  not  altogether  foolish,  and 
these  praoices  cannot  be  condemned  off  hand  by  reference  to  some 
broad  general  philosophy  of  life."  Adams  and  Sumner,  Labor 
Problems . p.364.  A defense  of  labor  can  also  be  found  in  Taussig, 
Principles  of  Economics,  Vol.II,  p,372. 

(2) 

Hecht,  The  Real  Wealth  of  Nations.  p.310. 

(3) 

Marshall,  Principles  of  Economics . p.700. 


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-18- 

The  economic  results  are  far  reaching.  From  the  individ- 
ual 's  point  of  vievi/j  the  result  may  he  excellent.  His  v\)ages  may 
increase,  and  he  may  be  able  to  buy  a vacuum  cleaner  and  a Ford 
automobile.  Socially,  however,  the  problem  assumes  a different 
light.  Any  small  group  may  maintain  such  methods,  but  sooner  or 
later,  they  v/ill  break  down  due  to  competition,  regulation  or 
substitution.  Furthermore,  the  workers  as  a whole  may  try  such 
a policy.  If  this  happens,  wages  will  be  lowered,  because  the 
national  dividend  v;ill  decrease,  and  profits  and  wages  fall. 

"There  is  an  idea  that  there  exists  some  force  able  to  keep  up  the 
normal  consumption  of  society  after  its  normal  production  is  allowed 
to  fall."  (l)  Of  course  this  is  false,  =tnd  viewed  in  the  light 
of  this  analysis  there  can  be  only  one  result  of  a general  limita- 
tion of  work;  naiiiely,  a fall  of  wages. 

Since  profits  come  out  of  the  national  dividend,  any  low- 
ering of  that  share  by  either  capital  or  labor  will  tend  to  dis- 
courage the  use  of  capital.  Assuming  this  limitation  to  exist  in 
one  country,  the  consequence  would  be  the  exportation  of  capital 
to  other  more  profitable  places.  Any  such  policy  usually  falls 
first  upon  the  capitalist.  As  capital  is  very  mobile,  it  will 
move  out  to  the  better  fields.  More  than  this,  it  may  drive  the 
capitalist  and  well-to-do  people  abroad.  Especially  will  the 
entrepreneur,  \7ho  delights  in  conquering  the  difficulties  of 
industry,  and  who  is  most  im3:>ortant  to  the  working  people  in 
general,  be  the  first  to  depart.  It  is  this  individual  who  in- 

TTl 

Rae,  E i;rh t Hours  for  Work . p.315. 


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-19- 

jraaaes  the  national  dividend  and  thus  raises  wa^es.  (l) 

Reflection  throughout  this  discussion  shov/s  that  the 
policy  of  restriction  of  output  is  detrimental  to  the  economic  and 
social  tfellbein';^.  From  the  standpoint  of  social  development  and 
progress,  nothing  can  be  more  disastrous  than  a general  application 
of  this  doctrine.  Its  application  by  either  capital  or  labor  af- 
fects three  parties;  the  employer,  the  employee  and  the  public. 

The  employer  may  lose  profits;  the  employee,  visages;  a.nd  the  public 
nay  suffer  a restriction  of  consu-mption  goods.  Upon  the  quick  ac- 
tion of  the  public  depends  the  overthrow  of  such  a mal-praotice . 


Marshall,  Pr inc Iples  of  Economics . p.i398. 


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BIBLIOGRAPHY 


Works  referred  to  in  this  Paper 
Adams  and  Suraner.  Labor  Problems. 

Commons^  John  R.  Trade  Unionism  and  Labor  Problems, 

First  Series. 

Elementary  Principles  of  Economics. 
History  of  Economic  Doctrines. 

The  Real  Wealth  of  Nations. 

Work  and  Wealth. 

Conflicts  of  Capital  and  Labor. 
Industrial  Commission,  Reports  of  U.  B.  Vols.  VII,  VIII, 

XVII,  XIX. 


Fisher,  Irving. 
Gi ie  and  Rist. 
Hecht,  John  B. 
Hobson,  J.  A. 
Howell,  George. 


Marshall,  Alfred  Principles  of  Economics. 

Marshall,  V/riglit  and  Field.  Materials  for  the  Study  of 

Elementary  Economics. 

Rae,  John.  Eight  Hours  for  Work. 

Seager,  Henry  R.  Principles  of  Economics. 

^Taussig,  F.  W.  Principles  of  Economics. 

Webb,  Sidney  and  Beatrice.  Industrial  Democracy. 


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